The Office of Inspector General (“OIG”) for the Department of Health and Human Services recently issued an Advisory Opinion that provides insight into how the agency evaluates arrangements that deal with the integration of technology, medicine, and patient monitoring under the federal Anti-Kickback Statute (“AKS”). In Advisory Opinion No. 19-02, OIG evaluated whether a pharmaceutical manufacturer could temporarily loan a limited-functionality smartphone to financially needy patients enrolled in federal health care programs. OIG concluded that the proposed arrangement could violate federal health care fraud laws but OIG would not impose civil monetary penalties or administrative sanctions in light of the purpose of the arrangement and certain safeguards in place. This Advisory Opinion related to the promotion of remote patient monitoring and is useful to telehealth providers and other pharmaceutical manufacturers to evaluate how OIG might analyze similar arrangements.

The FDA recently approved a digital medicine version of the antipsychotic drug that, once ingested, gives off a signal detectable by a wearable sensor (a “Patch”) on a patient’s abdomen. The wearable tracks patient adherence to the medication regimen and transmits this data through an App on the patient’s smartphone.

Under the arrangement, in order to access and use the App, the pharmaceutical company would loan a smartphone to patients who have a prescription for the digital medicine drug, do not already have a smartphone, and have an annual income below a specific percentage of the Federal poverty level. The offer would not be advertised to patients and prescribers would not receive any financial benefit for prescribing the digital medicine drug or for helping patients participate in the program. The smartphone would come preloaded with the App and only have the ability to make domestic telephone calls but no other capabilities. Patients would have the loaner smartphone for no more than two 12-week periods.

OIG determined that because patients would receive something of value from receipt of the smartphone, the patients would receive a form of remuneration. Therefore, the OIG examined the arrangement under the Civil Monetary Penalties Law (“CMPL”). OIG determined that the arrangement would implicate the Beneficiary Inducement of the CMPL because the provision of the loaner smartphone may influence a patient to continue to receive care from the particular prescriber. Similarly, the patient may believe he or she must continue to use the specialty pharmacy to obtain the digital medicine drug if the patient uses the loaner smartphone.

However, OIG ultimately determined that the arrangement would satisfy the criteria under the CMPL’s Promote Access to Care Exception and not subject the pharmaceutical company to administrative sanctions under the AKS statute for the following reasons:

The loaner smartphone would improve a patient’s ability to both properly use and access the full scope of the benefits of the digital medicine drug.

Provision of the loaner smartphone to low-income patients would also pose a low risk of harm to the government, as it would be unlikely to interfere with clinical decision-making.

The arrangement is not likely to increase costs to federal health care programs or beneficiaries through overutilization or inappropriate utilization.

Patients would be unlikely to request the digital medicine drug for the sake of obtaining the loaner smartphone given that the program would not be advertised to patients.

The arrangement does not pose patient safety or quality-of-care concerns.

Provision of the loaner smartphone would not influence a person to select the digital medicine drug.

OIG also commented on what type of arrangement it would not give the same discretionary approval. If the smartphone had additional functionality, such as access to an internet browser or a camera, or the ability to add other apps, OIG would very likely conclude that the arrangement would not meet the Promote Access to Care Exception. OIG explained that additional smartphone capabilities are problematic because they would relieve patients from the need to purchase their own smartphones or pay for a smartphone contract.

In light of the safeguards in place, OIG concluded that the pharmaceutical company would not be subject to administrative sanctions under the CMPL and AKS in connection with the loaner smartphone program. Although this opinion is useful for other providers and suppliers that have or intend to have similar patient monitoring arrangements in place, the advisory opinion only applies to the particular arrangement.

Drug and device manufacturers that operate patient assistant programs and providers that provide care to patients enrolled in federal health care programs through digital devices must carefully scrutinize their own arrangement to ensure it does not violate federal health care fraud laws. However, this opinion provides insight into OIG’s rationale with respect to such telehealth arrangements. It is clear that a carefully structured arrangement that improves patient safety and quality of care and has safeguards in place to guard against fraud and abuse may be deemed permissible under the CMPL and AKS.